Financial Express, Bangladesh

FICCI seeks rationalisation of customs duties

20 March 2007

NEW DELHI, Mar 19 (PTI): Industry body Federation of Indian Chambers of Commerce and Industry (FICCI) has demanded rationalisation of cut in peak customs duties proposed in budget 2007-08 claiming that it is affecting manufacturing of around 20 consumer durables.

These items include colour TV, air conditioners, refrigerators and electric fans besides set top boxes, cement and edible oil.

After a quick survey of manufacturing sector, FICCI has claimed that cut in peak duty rates from 12.5 per cent to 10 per cent to align it with Association of Southeast Asian Nations (ASEAN) levels, coupled with steep reduction in import duty under bilateral trade agreements has widened the duty differentials for key sectors.

India has signed bilateral free trade agreements with Thailand, Singapore and Sri Lanka.

"The import duty reductions on some basic raw materials would though help domestic industry, but zero import duty on finished goods under FTA and higher duty for raw materials and intermediate products would adversely affect domestic manufacturers of these items," a FICCI statement said.

The chamber urged the government to announce a matching tariff reduction for relevant inputs, whenever any finished product is subject to lower import duty as a result of general tariff reduction and also as a result of a free trade agreement.

Inverted duty - an anomalous situation where the duty on the finished product is lower than that on raw materials and intermediate products-acts as a disincentive for the domestic manufacturer in the global market.

The chamber pointed out the customs duty on colour TV, colour picture tubes (CPTs), ACs, refrigerators and other products imported from Thailand under FTA in the early harvest scheme has already become nil with effect from September 1, 2006.

Pointing out that much input for production of these items continue to attract a peak customs duty of 10 per cent, FICCI asked the Government to ensure that duties on inputs were not higher than the customs duty on finished products.